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Tips for Maximizing Your Next Bonus

According to human resources association WorldatWork, 85% of U.S. companies plan to offer their employees bonuses or similar compensation awards this year.1 Here are four ways to make the most of your next windfall—before you splurge on something special.

Have a plan:Prioritize your goals by assigning a percentage of your bonus to each. For example, you might decide to put 50% toward savings, 30% toward debt reduction and 20% toward your next vacation. Make sure to factor in taxes, too, since your regular withholding may not be sufficient.

Pay down credit card debt: The average U.S. household carries nearly $16,000 in revolving credit card debt and pays roughly $900 in interest each year.2 That money is better put to use elsewhere, so pay off any balances as soon as possible, starting with the card that charges the highest interest rate.

Save for emergencies: Even the healthiest and most financially secure among us need to plan for the unexpected. Set aside enough cash to cover three to six months’ worth of essential expenses. Put it somewhere relatively liquid—but not so accessible that you’ll be tempted to spend it.

Boost your retirement savings: If you participate in a workplace retirement plan, your employer might automatically deduct from your bonus whatever percentage you regularly contribute. If you don’t have an employer-sponsored retirement plan or are looking to save even more, you can contribute up to $5,500 ($6,500 if you’re age 50 or older) to an Individual Retirement Account this year.

Splurge: After meeting the above goals, reward all that responsible behavior with something just for you.

The bottom line: With a little planning, you can bolster your finances—and celebrate your achievements.

12017–2018 Salary Budget Survey.

22017 American Household Credit Card Debt Study, NerdWallet.

What you can do next

Don’t let the thrill of a bonus distract you from your financial goals. From debt management to retirement planning, make sure you have a plan that will help you put that money to good use.

Schwab Intelligent Advisory is made available through Charles Schwab & Co., Inc., a dually registered investment advisor and broker-dealer.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers are obtained from what are considered reliable sources. However, their accuracy, completeness and reliability cannot be guaranteed.

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